CIMA Exam Practice Kit: Financial Analysis

Cover......Page 1
Contents......Page 6
About the Author......Page 8
Introduction......Page 9
Aims of the Syllabus......Page 10
Learning Outcomes......Page 11
Assessment Strategy......Page 13
Syllabus Content......Page 14
Syllabus Content......Page 15
Syllabus Content......Page 16
Multiple Choice Questions – Managerial Level......Page 17
The IASB Framework......Page 18
Structure and Content of Financial Statements......Page 19
Recent Developments in International Standards......Page 20
Objective Test Questions......Page 21
Objective Test Answers......Page 23
Question 1 – Wels Ltd......Page 24
Stakeholder Groups......Page 25
Ownership and Control......Page 27
Treatment of Intra-group Balances......Page 28
Objective Test Questions......Page 29
Objective Test Answers......Page 32
Question 1-Principles of Group Accounting......Page 33
Question 2-Orchid Plc......Page 34
Explanation of Key Terms......Page 35
Answer 2-Orchid Plc......Page 36
The Treatment of Unpaid Intra-group Dividends and Interest at the Balance Sheet Date......Page 38
Other Adjustments......Page 39
Objective Test Questions......Page 40
Objective Test Answers......Page 43
Question 1......Page 45
Question 2-Zand Ltd......Page 46
Intercompany Transfer of Inventory......Page 47
Answer 2 – Zand Ltd......Page 48
Intra-group Trading and Unrealised Profits......Page 50
The Statement of Changes in Equity......Page 51
Objective Test Questions......Page 52
Objective Test Answers......Page 54
Question 2 – Reporting Performance......Page 55
Goodwill......Page 57
The Statement of Changes in Equity......Page 58
Equity Accounting – Intra-group Issues......Page 59
Joint Ventures – Intra-group Adjustments......Page 60
Objective Test Questions......Page 61
Objective Test Answers......Page 64
Question 1 – Hothouse plc......Page 66
Question 2 – Rainbow Ltd......Page 67
Answer 1 – Hothouse plc......Page 68
Answer 2 – Rainbow Ltd......Page 69
The Concept of the Sub-subsidiary......Page 71
Mixed Group......Page 72
Indirect Investment in Associates or Joint Ventures......Page 73
Objective Test Questions......Page 74
Objective Test Answers......Page 77
Question 2 – Tiger Plc......Page 79
Control Percentage vs Effective Percentage......Page 81
Answer 2 – Tiger Plc......Page 82
Piecemeal Acquisitions......Page 83
Goodwill and the Issue of Fair Value......Page 85
Objective Test Questions......Page 86
Objective Test Answers......Page 89
Question 2 – Prime Ltd......Page 91
Consolidated Balance Sheet as at 31 December 20*4......Page 93
Potential Damages......Page 94
Partial Disposals......Page 95
Deemed Disposals......Page 96
Objective Test Questions......Page 97
Objective Test Answers......Page 100
Question 1 – Deep Ltd......Page 102
Question 2 – Inca Plc......Page 103
Consolidated Balance Sheet as at 31 December 20*4......Page 104
Impact of Part Disposal......Page 105
Calculation of Disposal Profits......Page 106
A Sub-subsidiary Becomes a Subsidiary......Page 107
Changing the Rule Book......Page 108
Objective Test Questions......Page 109
Objective Test Answers......Page 110
Question 1 – The ABC Group......Page 111
Revised Balance Sheets......Page 113
Translating Foreign Operations......Page 114
Hedging......Page 115
Objective Test Questions......Page 116
Objective Test Answers......Page 118
Question 1 – Sizewell Ltd......Page 119
Consolidated Balance Sheet as at 31 December 20*4......Page 120
Selection of Exchange Rate for the Translation of Goodwill......Page 121
Group Issues......Page 122
Objective Test Questions......Page 124
Objective Test Answers......Page 127
Question 1 – Understanding Cash Flows......Page 129
Question 2 – Grime Ltd......Page 130
The Quality of Profits......Page 132
Issues Arising from a Review of the Cash-flow Statement......Page 133
Query from the Managing Director......Page 134
Core Definitions......Page 135
Specific Examples of Financial Instruments and their Treatment......Page 136
IAS 32 Disclosures......Page 137
Objective Test Questions......Page 138
Objective Test Answers......Page 140
Question 1 – PQR Plc......Page 142
Cash......Page 143
Initial Recognition of a Financial Instrument......Page 144
Impairment......Page 145
Hedging......Page 146
Objective Test Questions......Page 147
Objective Test Answers......Page 149
Question 1 – Investior Plc......Page 151
Answer 1 – Investior Plc......Page 152
Zero Coupon Bonds......Page 153
Capital......Page 154
Current Cost Accounting (CCA)......Page 155
Hyperinflationary Economies......Page 156
Objective Test Questions......Page 157
Objective Test Answers......Page 161
Question 1 – Wellers Ltd......Page 163
Selection of Method......Page 165
Indicators of a Hyper-inflationary Economy......Page 166
The Basics......Page 167
The Concept of Substance Over Form and Off-balance Sheet Financing......Page 168
Specific Examples of Substance Over Form......Page 169
Objective Test Questions......Page 170
Objective Test Answers......Page 172
Question 1 – Jennens Plc......Page 173
Question 2 – Loach Plc......Page 174
Specific Scenarios......Page 175
Balance Sheet and Income Statement Disclosures......Page 176
Payment Due to Employee......Page 177
The Basis of Effective Analysis......Page 178
Liquidity Ratios......Page 179
Cash Flow Ratios......Page 180
Objective Test Questions......Page 181
Objective Test Answers......Page 184
Question 1 – Clanmur Plc......Page 186
Question 2 – DMA Ltd......Page 187
EBITDA......Page 188
Answer 2 – DMA Ltd......Page 189
Exam Technique – Writing a Client Response......Page 191
Segmental Analysis [IAS 14]......Page 192
Objective Test Questions......Page 193
Objective Test Answers......Page 196
Question 1......Page 197
Answer 1 – The Arguments for and Against Segmental Reporting......Page 198
Basic EPS......Page 199
EPS Disclosure......Page 200
Objective Test Questions......Page 201
Objective Test Answers......Page 204
Question 2 – BDB Plc......Page 206
Answer 1 – The P/E Ratio......Page 208
EPS-Weaknesses......Page 209
Limitations of Ratio Analysis......Page 210
Creative Accounting......Page 211
Objective Test Questions......Page 212
Objective Test Answers......Page 215
Question 1 – Carmen plc......Page 217
Revaluation of Non-current Assets......Page 218
Contingent Consideration......Page 219
The Operating and Financial Review......Page 220
Accounting for Human Resource Issues......Page 221
The Global Reporting Initiative......Page 222
Objective Test Questions......Page 223
Objective Test Answers......Page 225
Question 2......Page 226
IAS 38 Intangible Assets......Page 227
Social Reporting......Page 228
Voluntary Social Reporting......Page 229
Barriers to Harmonisation......Page 230
IAS vs US GAAP......Page 231
Objective Test Questions......Page 232
Objective Test Answers......Page 233
Question 1 – Titanium plc......Page 234
Global Barriers to Harmonisation......Page 235
Specific Barriers to Harmonisation......Page 236
Question 1-Seed plc......Page 237
Answer 1-Seed plc......Page 239
Question 2-Liquid plc......Page 242
Answer 2-Liquid plc......Page 244
Question 3-Pen plc......Page 246
Advantages and Disadvantages of Preparing Consolidated Financial Statements......Page 248
Question 4-Soapbox plc......Page 252
The Conceptual Framework and the Future Development of International Accounting......Page 254
Recognition of  Options......Page 255
Question 5-David Raine......Page 257
DFG plc-Basic and  Diluted EPS......Page 259
ZXC plc......Page 260
Question 6-Greener plc......Page 261
Discussion of Issues Arising from Questions to be Raised at the AGM......Page 263
Intellectual Capital......Page 264
Question 7-MonAmi plc......Page 266
Answer 7-MonAmi plc......Page 268
Key Questions for Management......Page 270
Appendix......Page 271
Question 8-Financial Instruments Aptitude Testing......Page 273
Answer 8-Financial Instruments Aptitude Testing......Page 275
Question 9-Rook plc......Page 277
Consolidated Balance Sheet as at 31 December 20*4......Page 279
Consolidated Statement for Changes in  Equity for the Year Ended 31 December 20*4......Page 280
Proof of Foreign Exchange Movement for the Year......Page 281
Question 10-Illusion Ltd......Page 282
Board Presentation......Page 284
Impact of Defined Benefit Scheme on Reported Profits......Page 286
Question 11-Bata Ltd......Page 287
Problems of Historic Cost Accounting......Page 289
Restatement Using Current Purchasing Power......Page 290
Contents......Page 292
Requirement......Page 293
Space for Working for Section A......Page 296
Space for Working for Section A......Page 297
Requirement......Page 298
Question Two......Page 299
Question Four......Page 300
Question Five......Page 301
Question Six......Page 303
Requirements......Page 304
Question Seven......Page 305
Requirements......Page 306
Growing Perpetuity......Page 310
Solution One......Page 311
Requirement (a)......Page 312
Requirement (a)......Page 313
Solution Four......Page 314
Requirement (b)......Page 315
Workings......Page 316
Requirement (a)......Page 317
Requirement (b)......Page 318
Requirement (c)......Page 319